Dow futures slip 200 points after strong jobs report likely to keep Fed in bullish mode

July’s stronger-than-expected jobs report means the Federal Reserve is likely to raise interest rates by three-quarters of a percentage point at its next meeting, as opposed to the half-percentage-point hike expected by the markets, Seema Shah, chief global strategist at Principal Global Investors, said.

“Today’s number means a 75 basis point hike in September is almost a done deal. Not only is the labor market undoubtedly still tight, but wage growth is uncomfortably strong,” he said. wrote Shah in a Friday note. “The Fed has its work cut out to create enough slack that could ease price pressures.”

“All the jobs lost during the pandemic have now been recovered. But while this is good news, markets will take today’s number as a timely reminder that there are still plenty more Fed hikes to come. come,” she said. “Rates are over 4% – today’s figure should put any doubters to bed.”

—Carmen Reinicke

“That number is extraordinary. We’re a growing country. The rest of the world isn’t,” Jim Cramer said on CNBC’s “Squawk Box” after the strong report.

But Cramer cautioned about what that means for stock prices and explained why we’re seeing a negative reaction in futures.

“That means obviously when they (the Fed) come back, it’s going to stay hot, they’re still doing three-quarters,” Cramer said. “That’s not what we thought. Remember we kind of bought this market on the idea that it’s at 50 (basis points).”

After raising rates by 0.75 percentage points for the second consecutive time last week, the central bank will next meet to decide interest rates in September. Traders were hoping they would slow the pace to a half point rise at this meeting. The S&P 500 is up 8% in the past month through Thursday’s close.

—John Melloy

Stock futures fell on Friday after the July jobs report turned much stronger than expected, showing more jobs added, a lower unemployment rate and higher-than-expected wage growth. economists.

Dow futures slipped 231 points, or 0.71%. Futures linked to the S&P 500 fell 1.08% and Nasdaq futures lost 1.33%.

—Carmen Reinicke

The US economy added far more jobs than expected last month. On Friday, the US government said 528,000 jobs were added in July, easily beating a Dow Jones estimate of 258,000.

Admittedly, the average hourly wage rose 5.2% year over year, well above expectations. This could be perceived by the market as a sign that inflationary pressures remain strong.

Click here for the full story.

—Fred Imbert

Elon Musk said he thinks we are past peak inflation and forecast a mild 18-month recession ahead.

Musk’s comments came to Tesla’s 2022 shareholder meeting, held on August 4.

“We have a good idea of ​​how the prices of things change over time, because when you’re making millions of cars, you have to buy products months before they’re needed,” he said. .

—Carmen Reinicke

Amazon will acquire i robot for $61.00 per share, the consumer robot company announced Friday. The all-cash transaction is valued at approximately $1.7 billion, including iRobot’s net debt.

iRobot shares were halted on the news. The sale price of $61 per share is a 22% premium to Thursday’s close of $49.99. Amazon’s stock rose about 0.2% in premarket trading.

—By Michelle Fox

DoorDash shares rose more than 10% in premarket trading on Friday after the company announced quarterly results above expectations after market close on Thursday. The food delivery service said orders were up 23% from the last quarter of the year and revenue jumped 30%.

The company expects consumer spending to decline in the second half of the year, it said.

—Carmen Reinicke

Oil prices were moderately lower in Friday morning trading on Wall Street and on track for steep weekly losses. Concerns about a slowdown in demand have driven prices down in recent sessions.

West Texas Intermediate Crude Futuresthe US oil benchmark, is down 10.5% for the week, while the international benchmark Crude Brent lost 14.5%.

—Pippa Stevens

Cryptocurrencies fell this week after a tough start to the month. Bitcoin and Ether are both down around 3% since the start of the week and on track to post their first negative week in five.

The performance would also be the worst weekly drop since July 1, when Bitcoin lost 8.71% and Ether lost 13%.

—Carmen Reinicke

Stifel’s Barry Bannister raised his S&P 500 target for the second half to 4,400 from 4,200, noting that he continues to favor cyclical growth stocks in sectors such as software and media.

Here are two reasons Bannister gave for his target:

• The “1H22 S&P 500 selloff is still reversing.”
• “The S&P 500 also discounts the negative S&P 500 EPS y/a in 2022, but we see 2022 EPS holding.”

Bannister’s new target implies a 6% upside from Thursday’s close.

—Fred Imbert

European markets were flat Friday morning as investors tracked corporate earnings and awaited the key US jobs report.

The pan-European Stoxx 600 changed little at the start of the trade. Autos gained 0.8% while insurance stocks fell 0.8%.

Earnings continue to drive individual stock prices in Europe. Allianz, Deutsche Post, the London Stock Exchange Group and WPP were among the companies that reported before the bell on Friday.

-Elliot Smith

Asia-Pacific markets rose on Friday as investors shook off fears over Chinese military exercises near Taiwan, which follow US House Speaker Nancy Pelosi’s visit to the self-governing island this week.

MSCI’s broadest index of Asia-Pacific stocks outside Japan climbed 0.74%. Mainland China’s Shanghai Composite gained 0.28% and the Shenzhen Component rose 0.64%.

Taiwan’s Taiex jumped more than 2%, with chipmaker TSMC rising 2.8%.

While Friday’s jobs report showed the US economy added fewer workers in July than the previous month, that’s not necessarily a sign of economic weakness, according to Brad McMillan, CIO of Commonwealth Financial Network.

“If we see a reduction in hiring, even to the expected number, it seems much more likely to be due to a shortage of workers, rather than a sudden labor demand shock,” McMillan said. in a note. “With high demand, what matters here is the availability of labour.”

—Yun Li

The Fed’s commitment to bringing inflation down along with easing recession fears sparked a rally of relief in the market. The S&P500 is now 14.2% above its 52-week intraday low of 3,636.87 from June 17. The benchmark also just had its best month since November 2020, gaining more than 9% in July.

However, some on Wall Street are skeptical that the rally will last much longer. Max Kettner, chief multi-asset strategist at HSBC Bank, said the return is “a wishful thinking”, and he would need to see another reassessment of rate hike expectations and another sharp drop in real yields to believe it.

Widely followed Morgan Stanley’s Mike Wilson also referred to as this short-lived rally as corporate earnings begin to deteriorate.

Six of the 11 S&P 500 sectors were in the green week so far, led by consumer discretionary, which gained 2.9%.

The most negative sector this week was energy, which fell more than 8% and is on track for its worst week since June 17. The drop in energy names came amid falling oil prices. WTI is down more than 10% this week, on pace with its worst week since April.

—Yun Li